Hart's Reynolds Group Said to Seek Pactiv Buyout Loan Bids by Sept. 27

Reynolds Group Holdings Ltd., owned by New Zealand’s richest man, is seeking commitments by Sept. 27 for $1.5 billion of term loans to fund its purchase of Pactiv Corp., according to a person familiar with the transaction.

The maker of Reynolds Wrap aluminum foil, a unit of Graeme Hart’s Rank Group Ltd., may start marketing a planned sale of $2 billion in senior secured notes and $1.5 billion in senior unsecured notes in late October to complete the acquisition financing, the person said, asking not to be named as the talks are private. A meeting for lenders about the loans is being held today, the person said.

Auckland-based Reynolds agreed to buy Pactiv last month for $33.25 a share, according a regulatory filing, 39 percent more than the $23.97 close on May 14 before talks were disclosed. The acquisition, worth about $6 billion, is the biggest deal for 55- year-old Hart, a former tow-truck driver who built his fortune buying grocery, dairy and retail assets through his closely held Rank Group.

Credit Suisse Group AG, HSBC Holdings Plc and Australia & New Zealand Banking Group Ltd. agreed to provide the debt to fund the buyout, Lake Forest, Illinois-based Pactiv, the maker of Hefty trash bags, said in the filing.

A $500 million term loan A portion due August 2015 will have an interest rate of 4.5 percentage points more than the London interbank offered rate, with a 2 percent Libor floor, another person said Sept. 8. The loan is expected to price at 99 cents on the dollar.

A $1 billion term loan B portion due March 2016 will have an interest rate of 5 percentage points over Libor, with a 2 percent floor, according to that person. That loan is expected to price at 98 cents on the dollar. Libor is the rate banks charge to lend to each other.

Banks, Hedge Funds

A term loan A is sold mostly to banks, while a term loan B is sold to investors such as mutual funds, hedge funds or institutions that arrange collateralized loan obligations.

The senior secured and senior unsecured notes will have terms of eight years, Moody’s Investors Service said in a Sept. 9 statement.

The risk assessor gave provisional rankings of Ba3 to the term loans and the senior secured notes and Caa1 to the senior unsecured debt, according to the statement. Ba3 is the third- highest junk debt grade, while Caa1 is four notches lower.